Small Cap Value Report (31 Jan 2017) - CPR, JOUL, QRT, ALU, SCS | Graham Neary

31st Jan '17 by Graham Neary

44 comments 22936 reads

Good afternoon,

Apologies for the slow service today.

I thought it worked well yesterday, taking suggestions about which stocks to cover.

So if you have any suggestions, please let me know.

I provisionally intend to cover:

Carpetright (LON:CPR)
Joules (LON:JOUL)
Quarto Inc (LON:QRT)
Alumasc (LON:ALU)
SCS (LON:SCS)

Thanks

Graham

Carpetright (LON:CPR)

Share price: 185.5p (+6.6%)
No. shares: 67.9m
Market cap: £126m

Q3 Trading Update

I covered Carpetright recently, in the SCVR of Dec 13th.

That was the interim results, when the company reported:

We have made an encouraging start to the second half with a return to like-for-like sales growth in both businesses. As we enter the important January trading period, we remain comfortable with the range of market expectations.

It has certainly delivered on that today, confirming as follows:

Other bullet points:

Number of UK stores reduces slightly to 427.
Rest of Europe like-for-like, constant FX sales (the best measurement) are up 5.4% (in reported currency, up 22.4%).
The CEO comments and lets us know that the store refurbishment plan is on track. Excellent news.

I haven't got much to add to what I said last time - namely, that I think there is a good chance that management can execute their investment plan, at considerable cost but with the opportunity of creating attractive medium-term benefits.

More than three quarters of CPR's operating cash flow in H1 was spent on the refurbishment plan. We can't expect much free cash flow here for now. But if it helps to restore strong performance, it will certainly have been worth it.

Joules (LON:JOUL)

Share price: 216.5p (-2%)
No. shares: 87.5m
Market cap: £189m

Interim Results

Following the pre-close trading update in December, I warmed to this share, thinking that it could grow into its (then, 195p) share price.

The company is making that argument easier now:

When I ran the numbers on last year's financials, I thought that a fair estimate of the full-year result was about £7.1 million in PBT.

Those results were riddled with "non-underlying" costs, and today's report again insists on making some adjustments.

They are fairly simple, though: just £0.3 million…

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Lion Tamer

31st Jan '17

Hi Graham

I'd cast a vote to cover Alumasc (LON:ALU)

The market is lukewarm about today's results. Currency headwinds for most divisions, but good growth plus currency benefit from an American division, talk of more capital expenditure, a bit of a hike in the dividend, and debt + pension liabilities in the wings. I've a small holding, but the strength of the balance sheet has deteriorated a bit since I've held. I'd appreciate your views if you should have time & it appeals to you.

Thanks.

(Edit: I notice others also posted, sorry to repeat, I should have refreshed the screen before posting!)

V99

Would appreciate your view on Quarto (QRT) Graham - has fallen today after Trading Update

homosap

Could you add Carclo and ScS to the list?

monsnaggl

Would like some comments about Porvair (PVR). Announced very solid full year results yesterday, with positive trading continuing into the new financial year.

TerryQ

I'd like your views on GNC. Announced this morning a trading update. Not sure if this one fits your parameters?

FREng

One more vote for SCS (LON:SCS)

grb

Yes another vote for Alumasc (LON:ALU) please.

browndogwork

Would be interesting to hear your's and Paul's thoughts on last night's Dispatches which featured Boohoo. Thanks!

Quarto Inc (LON:QRT) total assets have fallen from $226.6m in 2011 to 212.8m. Goodwill has remained the same but other intangibles have risen from $1m to $61m in these 5 years. So tangible assets have fallen by about $74m in five years. Is there a reasonable explanation for this substantial fall in tangible assets?

Revenue has hardly grown, so if cash has been invested in growing titles and other intagibles as an investment in the future, it hasn't been working.

Brackendale

SCS - some interesting points from investors on social media this morning - debate as to whether dividend sustainable; observation of very thin margins; superficially cheap; and most pertinently perhaps that LFL appears to have declined in past 10 weeks despite the headline +ve 2.7% figure. So a nice one to get stuck into!

Bluey68

Alumasc (LON:ALU) and if possible at some point in the future, an outsider, SafeCharge International (LON:SCH).

Would be most grateful for your insight. Much appreciate your daily reports and many thanks,!

Ruth

davidargyll

Re Quarto
Q3 on 3rd November: "We have entered the last quarter confident that we will meet management expectations for the full year, reducing debt and delivering growth for a fourth successive year."

Q4 today: "Net debt on 31 December 2016 was $62.2m (2015: $59.5m). The increase was a result of both poor trading within BGD as well as negative working capital timing movements in the final quarter, which we expect will reverse in the first quarter."

Things changing quite so quickly between 3/11 and 31/12 I find very worrying; at best the visibility is much shorter than suggested, at worst the management doesn't know what is going on; sell before the placing/rights issue ...

(Why do I think they're going to need to go to shareholders? simply this: "We continue to invest in content with a portfolio of creative businesses underpinned by a scalable platform for organic and acquisitive growth.")

Skelray

White Paper re reducing cash prizes in Betting Shops. Will this effect stock market prices?

Skelray

AnonymousUser41492

+1 for Alumasc

Glen Keedy

I too am interested in Graham's opinion of SCS (LON:SCS). This trading update contained just one relevant figure of "like-for-like order intake growth of 2.7%". Oh and they "traded in line with the Board's expectations". Whatever they are. More figures with guidance are needed. Not gnomic proclamations like "We remain mindful that the Group still faces the key Easter and May bank holiday trading periods". So they will still be flogging stuff throughout April and May then - good to know that.

Last years Trading Update - you can find it on the Investigate website - was similarly figure free, but stated "the Group expects to report profits significantly ahead of current market expectations for the year 2015/2016". So last year they use "market expectations" but this year just "Board expectations". Uh-oh.

Why should we be treated to such pointless banalities when trying to make decisions of whether to buy, hold or sell? They must have some real figures already, unless all the cash is just stuffed down the backs of their own sofas and every six months they turn them all upside down and then cash up.

This year's RNS was very similar template to last year so I hope they tell their PR to re-cash last year's cheque...
Cheers
Glen

Fabrizzio

Hi Graham,

Apologies I clicked "thumbs down" to the article by mistake. Justo wanted to let you know I enjoy your reviews a lot.

Cheers

the0ni0nking

I have tried to work out the SCS LFL position over time dating back to the start of last financial year - it is possible to derive it based on the LFL figures they release at each point in time and this is what I believe it shows:

25 weeks to 16th Jan 2016: 8.80%
1 week 16th Jan 2016 to 23rd Jan 2016: 16.60%
19 weeks 23rd Jan 2016 to 4th June 2016: 22.13%
8 weeks 4th June 2016 to 30th July 2016: 15.93%
9 weeks 30th July to 1st Oct 2016: 4.50%
7 weeks 1st Oct 2016 to 19th Nov 2016: 5.64%
10 weeks 19th Nov 2016 to 28th Jan 2017: (0.98%)

Crude excel spreadsheet done in a rush at the minute so there may be errors but it looks to me as though the latest LFL figures have gone negative and I'd be concerned that may continue longer term.

I say that because it is also approaching some very impressive LFL growth at the start of 2016.

That's not to say the stock isn't cheap - clearly the low P/E and high dividend are value indicators but I'm not sure these latest figures will see it re-rate.

Laughton

Re Boohoo.Com (LON:BOO) - I wasn't going to say anything to browndogwork's request but as it's alrady got two thumbs up there are obviously others on here following BooHoo.

In case you haven't already seen it, excellent rebuttal issued today by the company to the Dispatches program.

http://www.boohooplc.com/~/media/Files/B/Boohoo/do...

Share price seems to confirm shareholders general response.
I don't think the TV people did themselves any favours by not accepting company's offer to film and interview staff openly at wharehouse.

Now waiting on result of NG auction.

Ternheim

Alumasc and Pressure Technologies please

Graham Neary

Ok, I've decided not to bother with OCDO and to do QRT ALU and SCS (would have done QRT anyway).

Many thanks

G

Small Cap Value Report (31 Jan 2017) - CPR, JOUL, QRT, ALU, SCS

Carpetright (LON:CPR)

Joules (LON:JOUL)

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Graham Neary

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